Layby

Buying on layby: the basics

Layby is a popular way to buy things when you are unable to pay for them straight away. The shop holds your goods while you pay for them in instalments over an agreed period of time. You can take the goods home when you make the last payment.

Layby is cheaper than using consumer credit because no interest is added to the cash price. It is useful if you don’t want to use the goods straight away.

Your rights

When the seller agrees to a layby sale the goods must be held for you - unless you do not make payments as agreed.

The seller cannot increase the price of the goods held on layby if new stock comes in at a higher price.

If the seller puts other stock of the same goods on sale while you have your item on layby you are not entitled to have it at the reduced price.

A seller may call the sale by another name, such as ‘part-payment’ but it is still a layby sale.

Layby Sales Act

Layby sales are covered by the Layby Sales Act 1971. This Act does not cover:

• sales where the total price to be paid is over $7,500 
• the sale of vehicles by a licensed motor vehicle dealer 
• agreements for part-payment of services.

Terms and conditions of a layby sale

Terms include things like the number of payments you will make and the date you must complete payment. You and the seller agree on the terms and, even if these terms are not in writing, it is a contract.

You will probably have to pay a deposit of an amount that you and the seller agree on. The amount is usually 10-20% of the total price.

The terms may include a fee if you cancel the layby. This may be a percentage of the price of the goods, and will be deducted from any refund owed to you when you cancel.

If the goods are too large to be stored at the shop, the seller may charge a storage fee. You must be asked if you agree to pay this fee when you begin the layby.

Paying off the layby

You and the seller agree on how much time you have to complete payments. One to three months is common. You can ask for longer, but the shop does not have to agree. You can agree to pay by:

• regular payments over the agreed period - eg, $15 a week for ten weeks
• payments of any amount so long as the full price is paid within the agreed time 
• making one payment of the full price at the end of the time.

It's a good idea to ask for a layby receipt or docket that shows:

• your name, address and contact details
• the name, address and phone number of the shop 
• each item purchased with its price 
• the terms of the layby.

Right to a written statement

Sellers will usually tell you how much you owe if you call in at the shop. However, you are entitled to get a written statement within seven days of asking, if you: 

• ask in writing 
• enclose a small fee
• don't ask more often than every 30 days.

The statement should tell you:

• the price of the goods 
• how much is still owing 
• the total amount you have paid 
• the current value of the goods to the seller.

If you say you are cancelling the layby the statement should also tell you:

• any loss in value 
• the selling costs 
• the amount of your refund.

Want to cancel the layby?

You can cancel a layby if you have not finished paying for it. Let the seller know by calling at the shop or writing a letter. You do not have to give a reason for cancelling.

If the goods have been lost or damaged while on layby, you can cancel the layby or ask the seller to either compensate you for the damage or to agree to replace the goods.

If there is a fee to cancel the layby the seller must be able to justify this fee by showing it is based on the actual selling costs of your layby.

Can the seller cancel the layby?

Yes, if you do not keep to the agreed terms. For instance, if you do not make payments as agreed or do not pay off the layby within the agreed time.

The seller must tell you the layby is being cancelled (by phone, in person or by sending notification to the address you gave them).

You may be able to get a refund

The seller may offer you more time to complete the layby rather than cancel it. If you accept, make sure you are clear about how much extra time you have to complete payments.

If you ask, the seller must give you a free written statement within seven days of cancelling.

After telling you the layby is cancelled, the seller must wait a reasonable time before returning the goods to stock.

Getting a refund of layby payments

If you cancel a layby you are entitled to a refund of the money you have already paid. You have the right to receive your refund in cash. You do not have to accept a credit note or buy other goods instead, even if the shop’s signs or layby dockets say 'no cash refunds on cancelled laybys.'

However, the seller may have the right to keep some of your money to cover selling costs and/or loss of value.

Selling costs cover such things as the cost of storing goods and staff time taken to write receipts. The amount charged must be reasonable and include only the actual costs of your layby.

Some stores have a set amount or percentage they withhold if a layby is cancelled. They may call this an administration fee or 'selling costs'. The seller must be able to justify the fee by showing that it is based on the actual selling costs of your particular layby.
Loss of value is any loss in retail value because the goods are no longer in season or a newer model is available. In most cases, the seller can not claim loss of value if you cancel within one month of beginning a layby. Some examples are provided here to help clarify this point.

Example of no loss in value

You layby a television costing $200 with a deposit of $50. You have three months to pay at $25 per fortnight. You make three payments totalling $75, then decide to cancel the deal. The television is still the current model so there is no loss in value. The seller deducts selling costs of $7 from your refund. This is the calculation:

Deposit + payments - selling costs = refund
$125 ($50 + $75) - $7 = $118.

Example of a loss in value

In June you put a $250 winter coat on layby with a $50 deposit, and make one further payment of $60. You cancel the layby in September. Summer goods are now in stock and coats are in the end-of-season sale. Coats the same as the one you have on layby are marked down by $75 -this is the loss in value. If the seller charges $5 selling costs and $75 loss in value, your refund will be $30. In this case, you may decide to continue with your layby. This is the calculation:

Deposit + payments - selling costs + Loss in Value = Refund
$110 ($50 + $60) - ($5 + $75 = $80) = $30.

An even bigger loss in value

If the same coats are heavily marked down by $125, you would end up owing the shop $20. In this case the calculation would be:
Deposit + payments - Selling Costs + Loss in Value = you owe shop
$110 ($50 + $60) - ($5 + $125 = $130) = $20.

Example of no loss in value even when goods are on sale

You put a dinner set costing $120 on layby and cancel after paying a total of $80. In the meantime, the seller has decided to not stock chinaware and has put all remaining dinner sets in a 'specials' sale. There is no loss in value because the goods are not seasonal or fashion items, and other shops are selling similar dinner sets at the usual price. You should be charged selling costs only.

What if I have paid only a deposit when I cancel?

If the selling costs and loss in value are worked out to be more than the deposit the seller can keep the deposit, but cannot ask you for any more money.

Got a problem with a layby?

The seller hasn't held the goods

If the seller has sold the goods or failed to set them aside on layby you can demand that they be replaced. If replacement isn't possible you can demand a full refund. You can also claim any difference in price if you have to pay more at another shop to obtain similar goods.

The store has closed down

 If the store where you have goods on layby has closed down, and gone into receivership, and if you are up-to-date with your payments, you have the right to pay for and collect your layby. If the seller doesn’t have enough stock to give you your layby they will owe you money.

To find out how you can get your layby or money, write to the company ‘receiver’.

The goods are faulty

If you collect the goods and find they are faulty, you have the same rights under the Consumer Guarantees Act that you have when you pay cash for goods.

The goods are damaged

If you collect the goods and find they have been damaged you can cancel the layby.

There is a dispute over the layby

If you and the seller cannot agree over a layby sale (for example, if you can’t agree on what the refund should be when the sale is cancelled) you can go to the Disputes Tribunal.